Kendall: No New Nunn-McCurdy Breach Expected for F-35

The $15.1 billion F-35 restructuring — including a cut of 179 fighters through fiscal 2017 — is not expected to trigger a Nunn-McCurdy unit cost overrun, according to the Pentagon’s top procurement officer.

“I’d be surprised … I don’t expect it,” said Frank Kendall, acting procurement czar, at Aviation Week’s Defense Technology Affordability and Requirements conference outside Washington Feb. 14. “I don’t see anything that would suggest that would trigger a Nunn-McCurdy.” That statute requires that the Pentagon fully review a program that exceeds cost estimates and validate its criticality to national security prior to proceeding.

One reason for the cut was worry over the unknown cost of having to upgrade a growing production fleet of aircraft as design issues arise during flight testing; only about 20% of the flight testing program has been completed. Maj. Gen. Edward Bolton, Air Force budget chief, on Feb. 13 said that his service’s Lockheed Martin F-35 budget is fixed, so any concurrency cost could jeopardize the number of units purchased in a given year.

“The bottom line is, the amount of money we have for the F-35 program, it is what it is,” Bolton said. “If they cost less, we’ll buy more. If they cost more, we’ll buy less.” The Air Force had planned to buy 24 F-35As in fiscal 2013, but ended up requesting 19; the total Air Force reduction for the future years defense plan is 98. “The amount of money we have is the amount of money we have to spend, and it costs what it costs.”

The per-unit pricing assumes that the program achieves at least 700 foreign sales. While this is possible — nine nations already have expressed strong interest — these foreign sales could continue to slip to the right, leaving the Pentagon, as the launch customer, with soaring unit pricing.

Kendall notes that the funding profile includes some money for concurrency, but any costs over the budgeted amount would affect the production profile.

The Pentagon’s per-unit estimate of the F-35 will be updated in a forthcoming Selected Acquisition Report that will likely be released in April. It will reflect the price increase owing to shifting 179 fighters beyond fiscal 2017.

The Pentagon also will update the sustainment numbers for the F-35, which raised eyebrows last year due to a life-cycle price tag of more than $1 trillion.

“We are trying to drive it down. We are really turning our attention to sustainment,” Kendall said.

Reuters reported that Tom Burbage, head of Lockheed’s F-35 program, said the Pentagon’s moves would increase only “somewhat” the total cost paid for each JSF by the U.S. and international allies.

“It will raise the overall average cost of the total procurement of all the airplanes bought,” Burbage said Feb. 14. “It just changes the dynamics of the cost equation,” he told Reuters.